James Wynn’s $100M Wipeout Spurs Binance Co-Founder CZ to Advocate for Safer Decentralized Perpetuals

Changpeng “CZ” Zhao, the former CEO of Binance, has put up a strategy to increase the security of decentralized perpetual futures trading.

CZ proposed establishing a decentralized pool for perpetual futures in a recent post, where all orders are concealed until the transaction is completed.

The goal of this design is to avoid mass liquidations, which can occur when big, obvious orders manipulate the market or induce panic, particularly in highly leveraged settings.

What is Behind CZ’s New Proposal?

James Wynn, a crypto whale, reportedly lost $100 million in liquidated positions as a result of heavy leverage and erratic market fluctuations. CZ’s concept follows this dramatic event.

The inherent hazards of decentralized finance (DeFi) derivatives markets, where sizable bets can have a domino impact on pricing and liquidity, are highlighted by Wynn’s losses.

According to CZ, a system that hides orders until they are executed could lessen the likelihood of front-running and shield high-risk traders from unexpected wipeouts.

The idea also reflects the DeFi community’s growing concerns about security vs transparency and how to create protocols that safeguard users without compromising decentralization.

Developers and traders have expressed interest in the notion, despite its hypothetical nature, underscoring the pressing need for stronger risk reduction tools.

Also Read: Crypto Trader James Wynn Risks $40M Long Profit on Bitcoin & Faces Losses After Failing to Close at ATH

CZ Flags Visibility in DeFi Trading as Major Vulnerability

Decentralized exchanges (DEXs) typically operate with full on-chain transparency, making all trades and orders publicly visible.

In the case of perpetual DEXs, which allow users to trade leveraged contracts, this means that every trader’s position and potential liquidation point can be monitored in real-time by anyone on the network.

According to former Binance CEO Changpeng ‘CZ’ Zhao, this level of visibility presents a critical vulnerability. When a trader opens a large long position, it becomes an easy target for others seeking to manipulate the market.

Malicious actors can deliberately drive the price down by executing counter trades or using MEV (miner extractable value) bots to exploit the position before it closes.

Zhao argues that such transparency can trigger coordinated attacks and unnecessary liquidations.

CZ Highlights Use of ‘Dark Pools’ in Traditional Finance for Hidden Trading

Changpeng “CZ” Zhao also pointed out that traditional finance already uses “dark pools” in a manner akin to secret trading. Institutional investors can execute huge deals in these private trading platforms without disclosing their orders to the general public.

By keeping transactions secret until they are finished, dark pools guard against price slippage and market manipulation brought on by obvious huge orders.

According to CZ, using this idea in decentralized perpetual futures could shield traders from huge liquidations and front-running.

Decentralized “dark pool” procedures could improve security and equity in DeFi trading by concealing order data until execution, particularly for high-volume users who are susceptible to market-targeted attacks.

Also Read: Binance CZ Asks Crypto Investors “If it goes to 0, can you survive?” Amid Sharing Guide to Surviving Crypto Volatility